After years of growth, the real estate market in the Czech capital has seen
a slow but steady decline, with decreasing prices and many more new
listings having turned Prague property into a buyer’s market. One factor
behind the change is waning interest from foreigners to invest into real
estate in the Czech capital. However, some parts of Prague have become more
attractive for Czechs and foreigners alike, while others remain popular
primarily with foreign clients.

Photo: archive of Radio Prague
According to last year’s population census, 10 percent of Prague’s
population is made up of foreigners. The majority of them are short-term
labourers from Ukraine and Slovakia who are unlikely to buy real estate.
But members of other expat communities – Russian, Vietnamese, or from
other EU countries and the US – were until recently important players on
the Prague real estate market.

Charles Recknagel is an American citizen who has lived in Prague since
1995, and recently bought an apartment in the district of Dejvice, in
Prague 6.

“My concern was to find a place that I could live in and sell fairly
easily. I was looking at the high end; that meant finding a place in a
location that would be attractive for people like me ten years from now, a
place that would hold its value.”

Charles Recknagel first looked to buy a flat in Prague even before the
property prices crash of 2008. Apartments across the country now cost 17
percent less on average than five years ago although in Prague, the drop
was much less dramatic.

“Before that time, the prices were climbing and became unaffordable when
combined with the falling dollar. So I began again about two years ago when
the prices collapsed world-wide, and the crown began to gain a little
strength against the dollar again. I looked intensively for about a year
but since I was interested in this several times over the past decade, I
knew what area I wanted to look at, and I knew how to go about doing it.”

The wait paid off for Charles Recknagel, and other buyers who are now
taking advantage of the low prices. But after a slight increase last year,
the sales of both new and second-hand apartments is stagnating: in the
first quarter of this year, 15 percent fewer flats were sold compared to
the same period last year. At the same time, the supply rises, making
Prague real estate a buyers’ market. Petr Čech runs the website Reality
Mix which collects property listings from agencies across the country, and
is one of the most popular property search engines.

Photo: Jiří Němec“This time last year, our website offered around 151,000 properties.
Today, we have 170,000 properties on offer, and it’s not because we would
have more agencies advertising on our site but because there are some
20,000 more flats on sale and for rent. There are also many apartments that
are sold without being offered on our website; there are for instance many
re-possessed apartments that are sold in auctions.”

Compared to 2005, the average price of second-hand flats in Prague has
grown by 25 percent. But last year, the prices fell by 4.6 percent, and
experts believe the decline will continue. Petr Čech again.

“Since January 2010, the prices have been steadily going down. In 2010,
we saw a more significant drop than last year but our statistics register
the decrease even now. Given all the circumstances, I don’t expect the
trend to reverse and prices to go up any time soon.”

One of the factors behind this development is the flight of foreign
investors. In the rich years leading up to the crash of 2008, foreign
investment groups would buy dozens of new apartments at a time, and acquire
attractive second-hand flats in prime locations. But this boom is gone, and
not likely to come back. Martin Fojtík runs the agency Home Sweet Home
which specializes in foreign clients.

“Investment groups from Ireland or the UK would buy a lot of property,
mainly in new projects. That’s something we don’t see any more. Today,
it’s mostly individuals who buy places in Prague 1, 2 and 3, Russian
clients in Prague 5 and Prague 13, and so on. But it’s not what it used
to be when a firm came and said, we want 15 apartments and we want you to
rent them out for us, which used to happen quite often.”

Monika Dubová works for Simproperty, a real estate and property
management agency active in the Czech Republic, Slovakia, Poland and
Bulgaria.

Photo: European Commission“The interest of foreign buyers is much lower than four and a half years
ago when we started. Even owners who now own property are more willing to
sell and focus on different markets.”

So are real estate markets in other central and Eastern European countries
more dynamic, compared to Prague?

“I can compare Prague with the markets in Slovakia, Bulgaria and so on,
and the prices went down even in those countries. But people expected the
opposite and now, with the prices and rents going down, the investments are
not as good and people are now willing to sell there, too.”

With most investors gone, the foreign-focused agencies now work mostly for
Czechs. Martin Fojtík from Home Sweet Home again.

“Recently, over the last two or three years, we have seen a declining
trend. Buyers have increasingly higher demands but that doesn’t mean real
estate gets sold to foreigners. In 2008 and 2009, some 70 percent of our
business was with foreigners, now 70 percent of our clients are Czech. At
the same time, the structure of our foreign clientele has changed. They are
now mostly Russian and Italian who are based in Prague but also the English
and Irish.”

Blažena Polehávorá is the owner and manager of Happy House Rentals,
another Prague-based real estate agency focusing on foreigners but whose
clients are now mostly Czechs.

“Foreigners are definitely less interested in buying than a few years
ago. They still buy but I can say that most of our clients for purchases
are now Czech. I think that the boom that we saw in the 10 or 15 years
after the fall of communism is gone, and I also think that most foreigners
who live in Prague have already bought property.”

Photo: Jiří Němec
During the years of massive foreign investment into Prague real estate,
the market became friendlier for foreign buyers. For one, ownership records
are now online which narrows the risk of fraud. Banks are more willing to
provide mortgages – whose volume is up – and agents specializing in
foreign clientele work with reliable contractors who renovate older,
second-hand apartments. Charles Recknagle, a happy owner of a flat in
Prague 6, says the process was relatively easy.

“Everybody involved – the real estate agent, the seller – was very
open. Also the whole process of confirming who the owner of the building
was a huge bugaboo for anyone but particularly for foreigners buying
property in the Czech Republic because there was this fear 10, 15 years ago
that you might end up buying something that is not owned by the seller. But
I was pleasantly surprised that now all this is on line, so that kind of
openness and transparency made buying property quite easy.”

Prague 6, located north of the historic Prague Castle, easily accessible
by metro and with the city’s largest park, Stromovka, remains one of the
most popular areas to buy property, with Czechs and foreigners alike. Petr
Čech from Reality Mix explains.

“Our statistics suggest that Prague 6 is the safest area to invest in.
In all other areas, prices go down and will go down in the future. However,
Prague has seen the lowest price decrease, compared to the rest of the
Czech Republic. Other cities and towns have registered much sharper
drops.”

The historic centre – Prague 1 and Prague 2, along with Vinohrady, a
pleasant residential area to the east of the centre, are also in high
demand, and experts don’t expect any sharp price drops there, either.

Photo: Kristýna Maková“In Prague, people are still interested in Prague 1, some parts of
Prague 2 and Prague 3, as well as Prague 6. These are the areas most
frequently explored at our foreign-language websites, most often in
Russian, followed by English and German. But we also know that for example,
parts of Prague 5 around the Anděl shopping district are popular with
French clients which has to do with the fact that a French lyceum is
located there.”

Among the upcoming parts of Prague is Holešovice in Prague 7, with many
large, spacious apartments as well as new construction activity. Another
attractive area is Vršovice, in Prague 10, which has the air of Vinohrady
but worse transport connections which makes it more affordable.